Not a bad idea for the US if deposits were not so concentrated in so few TBTF banks: China cuts bank reserve requirements to stimulate lending China attempts to address slowing of its economy

China’s Central Bank said Sunday that it will cut its bank reserve requirement ratio by one percentage point to stimulate more lending into a slowing economy.

The new reserve requirement take effect Monday, the bank said in a statement. The move allows banks to hold onto less of their money and lend more of it out. The Communist Party-run People’s Daily said the cut will release 1.2 trillion yuan ($240 billion Cdn) into the world’s second-biggest economy.

The Central Bank also said it will cut an extra one percentage point for commercial banks providing agricultural financing and an extra two percentage points for the Agricultural Development Bank of China. It will also cut the requirement by an additional half a percentage point to eligible banks that lend a certain share of loans to agricultural borrowers and small businesses.

The Central Bank last cut its reserve requirement in February, when it slashed the rate to 19.5 per cent for big banks and 16 per cent for small- and medium-sized banks.

Official data showed last week that China’s economy grew by seven per cent in the first quarter of the year, the lowest level since the financial crisis of 2009.

China Agricultural Bank IPO


A Chinese man walks past a branch of the Agricultural Bank of China in Beijing. The bank got a deeper cut to its reserve requirement in hopes that will stimulate the economy. (Ng Han Guan/Associated Press)

“Though the growth in the first quarter met the official target of around seven per cent for 2015, the slowdown in several areas, including industrial output and retail sales, has caused concern,” said a report published by the official Xinhua news service covering the announcement.

China’s central bank is dealing with a property downturn, factory overcapacity and local debt, that is expected to slow growth in the coming year.


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